The Donald Trump administration is going to review the generalized system of preferences (GSP) through which Indian exporters get preferential market access to the US

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New Delhi: Indian exports up to $5.6 billion could be hit as the US pressures India for greater market access by declaring a review of the generalized system of preferences (GSP) through which Indian exporters get preferential market access to the US.

The GSP programme allows duty-free entry of 3,500 products from India, which benefits exporters of textiles, engineering, gems and jewellery and chemical products. The total US imports under GSP in 2017 was $21.2 billion, of which India was the biggest beneficiary with $5.6 billion, followed by Thailand ($4.2 billion) and Brazil ($2.5 billion).

The Trump administration has been accusing India of unfair trade practices and has challenged most of its export subsidies at the World Trade Organization (WTO). It has also not granted India an exemption on unilateral hike in steel and aluminium tariffs, unlike to its other strategic allies. On Friday, the US treasury department added India to the currency practices watch list saying New Delhi increased its purchase of foreign exchange by $56 billion in 2017 which does not appear necessary given its already robust foreign exchange reserves.

The US Trade Representative (USTR) on Friday announced that it is reviewing the GSP eligibility of India, along with Indonesia and Kazakhstan, based on concerns about the countries’ compliance with the programme.
For India, the GSP country eligibility review is based on concerns by the US dairy industry and medical device industry alleging Indian trade barriers affecting US exports in those sectors. India has very high import duties on dairy products to protect its domestic industry. It has also recently put price controls on medical devices like cardiovascular stents, drawing ire from big US pharma companies.

“India has implemented a wide array of trade barriers that create serious negative effects on US commerce. The acceptance of these petitions and the GSP self-initiated review will result in one overall review of India’s compliance with the GSP market access criterion,” USTR said.

A commerce ministry official speaking under condition of anonymity said though India is worried about the move, it hopes a majority of US industries which get cheaper intermediate products from India due to GSP benefits will support continuation of the programme. “We hope it won’t be easy to withdraw GSP benefits to India,” he added.
Abhijit Das, head of the Centre for WTO Studies at the Indian Institute of Foreign Trade, said given Trump’s tendency to take unilateral action, there could be threat to India’s continuous access to GSP. Das said India should be ready to drag the US to dispute settlement if US stops extending GSP to India on the grounds that India is creating market access barriers to the US.

Though GSP is a voluntary measure by the US and other developed countries, they need to be guided by firm WTO principles, Das said. In 2003, India won a case against the European Commission as the latter denied India GSP on textiles and drugs, making such preferences conditional to countries combating drug production and trafficking or protection of labour rights and environment.

Gems and jewelry exports fell 16.6 percent from a year ago to $3.4 billion in March, the second straight month of contraction that acted as a drag on overall exports, according to commerce ministry data released on Friday. That has pushed India’s trade deficit deep into the red and given more ammunition to rupee bears, who have driven the currency to a five-month low.

ET Intelligence Group : Jaguar Land Rover (JLR), the engine that keeps Tata Motors going, is showing signs of sputtering in key overseas markets, and that’s unlikely to prompt an earnings upgrade estimate for the company in a hurry.

In the past three months, the Tata Motors stock has lost about 20 per cent. With JLR still to regain its lustre and projected earnings per share at Tata Motors falling 38 per cent since January 2017, reasonable valuations alone may not be enough to draw long-term investors back to the stock.

JLR’s retail volumes dropped 8 per cent in March, paced by 16-26 per cent lower UK and Europe dispatches and moderating sales of its old models. Recently launched E-Pace and Velar reported traction but could not offset the decline in sales of JLR’s older models.